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Saturday, November 8, 2008

Rising Risk of Hard Landing in China

Read this article by Dr Doom (Nouriel Roubini) published on Nov 4, 2008, “The Rising Risk of Hard Landing in China: The Two Engines of Global Growth – U.S. and China – are Now Stalling”.

Key points in the conclusion are:

  1. Risk of a hard landing in China sharply rising
  2. Global economy already headed towards a global recession
  3. U.S. contraction now dramatically accelerating
  4. First engine of global growth – the U.S. on the consumption side – now already shut down
  5. Second engine of global growth – China on the production side – on its way to stalling
  6. With 2 main engines of global growth now in serious trouble, a global hard landing now almost certainty
  7. Hard landing in China have severe effects on growth in emerging market economies in Asia, Africa and Latin America as Chinese demand for raw materials and intermediate inputs has been a major source of economic growth for emerging markets and commodity exporters
  8. Recent sharp fall in commodity prices and near collapse of Baltic Freight index are clear signals that Chinese and global demand for commodities and industrial inputs is sharply falling
  9. Global growth – at market prices – will be close to zero in Q3 of 2008, likely negative in Q4 of 2009 and well into negative territory in 2009
  10. So brace yourself for an ugly and protracted global economic contraction in 2009.

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